Debt Bubble Chronicles: We Are Now Paying for the Destruction of the US Dollar and Economy… Literally

Interest-Rates / US Debt Dec 30, 2010 - 11:55 AM GMT

We just hit another milestone in insanity.

I’ve written before that thanks to its QE lite and QE 2 programs, the Fed is now officially the single, largest owner of US debt. However, even that nonsense pales in comparison to the Fed’s latest accomplishment, that of owning over $1 TRILLION in US debt.

That’s right, as of yesterday afternoon the Fed now owns over $1 trillion in US debt. This amounts of over 7% of the US’s total debt, own by our central bank.

Now, may commentators have pointed out the various ways in which this policy has endangered the US’s balance sheet, economic clout, and currency. However, there’s one element that NO ONE seems to have picked up on. That is…

You, me, and everyone else in the US, is now PAYING the Fed for its insane, anti-Middle class policies.

Remember, we are continually paying the debt via interest payments drawn up from tax receipts. Thus, by buying up US Treasuries, the Federal Reserve is in effect reaping interest payments from the US populace.

Now, consider that none of us had any say in the Fed’s policies, nor the appointment of our esteemed Fed Chairman, Ben Bernanke. None of us voted for him. None of us influenced his policies. And, at this point, virtually none of us approve of what he’s doing.

But ALL of us are NOW paying him and the Fed for doing it. In fact, because the Fed is officially the single, largest owner of US debt, the Fed is, in effect, raking in more money from our debt situation than ANYONE else on the planet.

Thus, we are paying LITERALLY for the insane policies of the US Federal Reserve. Never mind abstract arguments of “paying” for the Fed’s mistakes in the sense of the US Dollar collapsing or the US’s economy imploding. We are LITERALLY paying BILLIONS in interest payments to the Fed.

This in turn means we are:

Helping the Fed to continue destroying the US Dollar
Funding the Fed’s bubble-blowing efforts
Financing the very same policies that have eviscerated the Middle class and retirees

Given that we have no vote or say in the Fed’s actions, I know of only one way to deal with this situation and that’s to buy assets that will maintain their purchasing power and produce REAL returns to counteract the Fed’s anti-Dollar policies.

Good Investing!

Graham Summers

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

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Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2010 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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Comments

Joe Danyko (M.S.B.A. Quality Management)
30 Dec 10, 15:59

I disagree!

I disagree with your comment, "Now, consider that none of us had any say in the Fed’s policies, nor the appointment of our esteemed Fed Chairman, Ben Bernanke. None of us voted for him. None of us influenced his policies. And, at this point, virtually none of us approve of what he’s doing."

The Federal Reserve was given its mandate by Congress and we have all seen Big Ben on the Hill Testifying about this very subject! We have a Representative Government with elected legislators that have all the power they need to oversee the Federal Reserve! In-decision by congress is a decision not to do anything about the Federal Reserve’s Policies! May, I remind you that we just had an election which I predict will just clog up the legislative process more because politicians will sit on their hands while Rome is allowed to burn! Your article should have put blame not just on the Federal Reserve but squarely on the Politicians that have failed to solve our Financial Crisis over the last 40 years (regardless of which party has been control)! I challenge you to take an unbiased political review of the past 40 years and really look at why the middle class has shrunk!

Joe Danyko (M.S.B.A. Quality Management)

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